THE TAX SERIES (PT. 2)

I want to believe that you have read the part 1 of this series. Not that it is necessary, but for better understanding, it is best you click here and read it up. The truth is there are a lot of information for you that would most likely not be repeated here.

In part 1, we established that everyone earning income in Nigeria is obligated to pay tax to the appropriate authorities. We also listed the different taxes in Nigeria and the different tax authorities that administer these taxes. The benefits you stand to get from paying your taxes were not left out. We also talked about individuals who are not on any payroll, that is, business owners, freelancers (although I did not list this category the last time) and how they are to pay their taxes.

Today, we are concentrating on individuals who are on payrolls of companies, businesses, government parastatals, etc, popularly termed employees. These categories of people don’t own or run a business of their own. Their incomes come from their employers’ pocket.

You see, these guys, like every other income earning individual also pay Personal Income Tax (PIT), just that theirs is given a different name, PAYE.

PAYE stands for “Pay As You Earn”. Meaning, as the income is coming, the government should be given its due. It is a form of tax that employers deduct from their employees’ salary and remit to the state government every month. Like I said earlier, it is another form of Personal Income Tax (PIT), just that this is done on a monthly basis.

Another clear difference between PAYE and the general PIT is that it is the employers that are ordinarily charged with the responsibility of remitting it to the government. So therefore, it is usually deducted before the salaries are paid. However, if an employer does not deduct the said tax before paying salaries, the responsibility of remitting PAYE to the State Inland Revenue Service falls on the employee.

This would mean that whenever you get a new job, as soon as the intending employer is telling you what your monthly take home is, kindly ask if tax is deducted already. If the answer is in the negative, inquire further as to who has the responsibility to pay. If you are told that it is the employer’s, just know deep down in your heart that the proposed take home pay is not what you would actually get, as tax would be deducted before you are paid. However, if you are told that the responsibility is yours, know that when the take home pay is paid into your account, you next step is to go to any designated bank provided by the tax authorities of the state where you work, and make the necessary payments.

TIME TO PAY

The PAYE must be remitted before the 10^th day of next month. This means, that when an employer who has taken this responsibility of deducting from the monthly pay of his employees pays salary for the month of January, 2023, he/she must remit the PAYE to the state government before the 10^th day of February. That is, employers are expected to pay their employees before the 10^th day of the next month. We are Nigerians, and we know that there are some offices that do not pay till middle of the next month, what should be done? That is the one question that has been on my mind.

FAILURE TO FILE TAX

I had stated this in part 1, but it is important to note that as an employer, if you fail to make proper tax deduction or do not remit as at when due to the tax authorities, you can be charged to court. If found guilty, you would be liable to a penalty of the total tax due, 10 % annual interest for every year the taxes were not filed or filed late. One can also face a term imprisonment for this.

HOW TO CALCULATE YOUR PAYE

How to calculate your tax was also stated in part 1, however, you are best advised to go to the appropriate tax authorities to help out with the proper calculations.  This is because the tips that was given in part 1 were just be for guidance.